Steps to determine what it means to be self-employed

Written By Gary Spirer Published March 29th, 2010

The idea sounds great: “I am self-employed.” This means you come and go as you please, make your own money, and your own decisions. You run your own business. But when it comes time to do taxes, what exactly does it mean to be self-employed? Let’s find out.

Step 1 Know the basics

Someone who is self employed, technically speaking, is the owner of a business, or this person could simply earn a living by working for himself or herself. In this case, no specific business name or title is created necessarily. It merely means that the person seeks out and completes his or her own means of earning an income. Perhaps he or she is paid in cash, or perhaps he or she is paid via check but no taxes are taken out. The fact is, he or she is not an employee of someone else, but rather an individual with his or her own source or sources of income.

Step 2 Manage your taxes

Come tax time, this income needs to be reported. He or she is either a sole proprietor, or involved in a partnership or LLC. An LLC is a limited liability corporation. A self-employed individual must pay self employment taxes for the business each and every business year. The losses and profits for that individual who is self employed must be reported via a 1040 and a Schedule C. This is passed through the individuals own person tax returns using the person (business owners) own person social security number or tax ID.

It’s that simple. Remember, self-employment is very different from an LLC. It is important to know your business type. Please visit for more great business advice.


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